Question

ABC mfg co has estimated breakeven volume of 50,000 units for its new widget. If fixed costs are $100,000, unit selling price is $25.00 and ABC sales force commission is 8% of selling price, what is their %contribution?

a. $2.00
b. 8%
c. 10%
d. 5%
e. 9%

Answer 1

b. 8%

Step-by-step explanation:

Percentage contribution is determined as the associated fixed costs divided by the break-even revenue. The break-even revenue is given by the product of the break-even volume by the unit selling price. The percentage contribution is:

`\%C=(FC)/(N*P) \\\%C=(\$100,000)/(50,000*\$25.00)\\\%C = 8\%`

Note that the sales force commission does not interfere in the contribution.

The answer is b. 8%